India-US vs China: The Race for critical Minerals | The Daily Brief

Summary

In this episode of the Daily Brief, host Kashish Kapur covers two major stories. First, the U.S. and India have partnered to secure critical minerals like lithium and cobalt, essential for clean energy technologies, as they aim to reduce dependency on China. This deal is crucial for both countries' EV markets and green energy goals. Second, India’s growing obsession with stock market investing is highlighted, with household participation in stocks and mutual funds rising significantly since the pandemic, signaling a shift in India's financial landscape.

Takeaways

• 🌍 India and the US have signed a deal to secure a steady supply of critical minerals like lithium and cobalt for green energy and EV battery production.
• 🔋 Critical minerals like lithium, cobalt, neodymium, and graphite are essential for technologies like EVs, smartphones, renewable energy systems, and defense equipment.
• 📉 China's dominance in mining and refining critical minerals, with around 70% control of rare earth production and 58% of lithium refining, makes global supply chains vulnerable.
• ⚠️ Global reliance on China for these minerals poses risks, as China has previously restricted exports of minerals like antimony, germanium, and gallium, which are crucial for semiconductors and defense systems.
• 🤝 The India-US deal aims to reduce dependence on China's mineral supply chain, supporting India's growing EV market and the US's clean energy goals.
• 🔄 India is focusing on developing recycling technologies and urban mining to extract valuable minerals from used electronics, contributing to a circular economy.
• 🛡️ The US is looking to diversify its mineral supply chains to ensure national security and technological advancement, reducing reliance on China.
• 📊 Household participation in India's stock market has increased, with 21.5% ownership of listed stocks, compared to 16-17% in 2011-2016, showcasing growing financial savvy.
• 💰 Indian households are also investing heavily in mutual funds, with 63% of assets held by households, up from 55% in 2019.
• 📈 The overall exposure of Indian households to financial markets has grown significantly, accounting for 44% of India's GDP, highlighting a shift toward more diversified investment strategies.

Q & A

What is the significance of the recent US-India partnership in the green energy sector?

The US-India partnership aims to secure a steady supply of critical minerals like lithium and cobalt, which are crucial for manufacturing EV batteries and clean energy technologies. This deal is vital for reducing dependency on China and strengthening both countries' positions in the green energy race.

Why are critical minerals important for green technology and modern electronics?

Critical minerals, such as lithium, cobalt, and rare earth elements, are essential for producing electric vehicles, renewable energy systems, smartphones, and advanced defense equipment. They possess unique properties that are crucial for technologies driving the green energy transition.

What role does China currently play in the global supply chain of critical minerals?

China controls about 70% of global rare earth production, 58% of the world’s lithium refining, and 80% of cobalt refining, making it a dominant player in the critical minerals supply chain. This allows China to influence the production and distribution of green technologies and advanced electronics.

How does China's control of critical minerals impact global supply chains?

China’s control over critical minerals makes global supply chains vulnerable to disruptions. By controlling mining and refining, China can limit exports, affecting industries reliant on these minerals. Past examples include restrictions on antimony, germanium, and gallium, impacting semiconductors and defense technologies.

How will the US-India deal help reduce their dependence on China for critical minerals?

The US-India deal will allow both countries to diversify their supply chains by securing access to critical minerals outside of China. India will gain materials for its growing EV and clean energy sectors, while the US reduces reliance on China's refining capabilities, enhancing national security.

What are some of India's opportunities in the critical minerals sector?

India lacks domestic production of critical minerals like lithium and cobalt, but the US-India deal provides access to these resources. Additionally, India has potential in recycling technologies and urban mining, which can extract valuable minerals from used electronics, contributing to a circular economy.

Why is the shift in Indian household investments significant?

Indian households have moved away from traditional investments like gold and property towards greater participation in the stock market. As of June 2024, they own 21.5% of India's listed stock market, up from 16-17% in 2011-2016, showing a more risk-tolerant, financially savvy approach.

How has mutual fund investment grown among Indian households?

Indian households hold about 63% of the total assets in the mutual fund industry as of June 2024, up from 55% in 2019. This shift shows a growing preference for indirect investment options alongside direct stock holdings, further increasing household exposure to financial markets.

How does Indian household exposure to financial markets compare to other countries?

Indian households' exposure to financial markets is around 44% of India's GDP. While this is lower than the US, where it's over 160%, it is similar to the 30-55% range seen in advanced economies, reflecting significant progress in financial market participation.

What are some other key developments mentioned in the episode that relate to India's economy?

Key developments include Blackstone raising a $1 billion Asia-focused private equity fund with a focus on India, and Temasek's talks to acquire a stake in Ham, a consumer market player. Both highlight growing foreign interest and capital inflows into India's expanding market.